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NFL (national football league) mobile device strategy

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  • 1. NFL Audit James Corne Bob Edmiston Geoff Kowalski Jon Schultz
  • 2. How does the NFL manage its content portfolio?•  Goal: Quality Product to Maximum Audience •  Saturation, Breakeven, Allocation •  Content NOT Distribution?
  • 3. Where is the NFL?
  • 4. Coverage Map
  • 5. •  28/30 Most Watched Television Programs •  $9.4 Billion Revenue •  Time-Sensitive ContentWhy has this Worked?
  • 6. Investment & Production Costs? $ $ $ $
  • 7. Risk!!!
  • 8. Personal Conduct Policy
  • 9. And the Winner Is…
  • 10. Quality Control $560M/ 8yrs   $400M   $207M/ WASH  
  • 11. How has it Worked? •  Value Map & Sources •  Silos & Exclusivity •  Competition
  • 12. Media Timeline 1994   1959   Fox  lagging  in  raGngs,   CBS  picks  up  NFL   buy  rights  to  NFL  for   1.8  B.       1939            1987   2006   ESPN  is  a  nobody,   NBC  is  first   NFL  Network  Created   picks  up  NFL  network  to  pick   up  the  NFL  
  • 13. Value Map: How Fans get the NFL
  • 14. Max Revenues: Silos & Exclusivity Per  Year:     Per  Year:     Per  Year:     2006-­‐2013     2011-­‐2014     2009-­‐2012     $622.5M   $1B   $180M   $650M   $1.1B   Bully Networks NOT Fans! $712.5M   $3.09B  
  • 15. Network Revenues Thursday   Period AFC  Package NFC  Package Sunday  Night Monday  Night Total  Amount Night $420  million/1982–1986 NBC CBS None ABC   yr $473  million/1987–1989 NBC CBS ESPN  (2nd  half) ABC   yr TNT  (1st  half) $900  million/1990–1993 NBC CBS ABC   yr ESPN  (2nd  half) TNT  (1st  half) Fox  ($395  1994–1997 NBC ABC   $1.1  billion/yr million/yr) ESPN  (2nd  half) CBS  ($500   Fox  ($550   ESPN  ($600   ABC  ($550  1998–2005 ESPN $2.2  billion/yr million/yr) million/yr) million/yr) million/yr) NFL   CBS  ($622.5   Fox  ($712.5   NBC  ($650   ESPN  ($1.1   $3.085  2006–2013 Network   million/yr) million/yr) million/yr) billion/yr) billion/yr ($0/yr)
  • 16. Will it Continue to Work? •  Contract Length •  Mobile vs. Wireless •  Bring In-house?
  • 17. Length, Channels & Revenue8  7  6  5   Contract  Length  4   Number  of  Distributors  3   Revenue  (Billions)  2  1  0   82-­‐86   87-­‐89   90-­‐93   94-­‐97   98-­‐05   06-­‐13  
  • 18. Max Revenues: Silos & Exclusivity Per  Year:     Per  Year:     Per  Year:     2006-­‐2013     2011-­‐2014     2009-­‐2012     $622.5M   $1B   $180M   $650M   $1.1B   ? ? 2 year $712.5M   Deals $3.09B  
  • 19. NFL Mobile1999 Text, Email, Web2005 Video
  • 20. NFL Mobile $15B by 2013 ($2.2B in Q1&Q2 ‘10)
  • 21. NFL Mobile = $720 M/4-yrs
  • 22. Question…Mobile vs. Wireless Internet TV?
  • 23. Tablets •  New Silo- Wireless •  Exclusive? •  AT&T? •  Verizon? •  Apple? •  Samsung? •  Wait & See •  Emerging or Established? •  Develop or License? •  Contract •  Length vs. Value
  • 24. Multiple System OperatorsRank   MSO   BasicVideoSubscribers   1   Comcast  CorporaTon   NBC   22,937,000   2   DirecTV   Silo-­‐ed   18,934,000   3   Dish  Network  CorporaTon   14,289,000   4   Time  Warner  Cable,  Inc.   12,551,000   5   Cox  CommunicaTons,  Inc.1   4,968,000   6   Charter  CommunicaTons,  Inc.   4,653,000   Silo-­‐ed   7   Verizon  CommunicaTons,  Inc.   3,290,000   8   Cablevision  Systems  CorporaTon   3,043,000   9   AT&T,  Inc.   2,739,000   Xbox  360?   Microso`  
  • 25. Web Traffic RankingWebsite Rank (US Traffic)ESPN.com 22ndNFL.com 184thMLB.com 291stNBA.com 303rd
  • 26. Internet TV •  GoogleTV? •  “wait & see” •  Winner? •  In-house? •  Decrease risk? •  Cord-Cutting? •  Length? •  Reversible?
  • 27. Internet TV changing the game?•  Revenue:   –  Direct  or  Indirect  from  consumer?  •  NFL  as  a  Distributor:   –  Furthering  NFL  Network  and  NFL  RedZone  channels?  •  GlobalizaTon:   –  Channel  for  distribuTon?  •  Engagement:   –  How  important  is  fan  interacTon?  •  Mobility:   –  Greater  access  with  increasing  connecTvity?  •  Other?  
  • 28. Current TV Market Pie $8  Billion   Subscriber   Ad  $$   $$   NBC   DirecTV   CBS   $4  Billion   Ad  $$   ESPN   FOX  Ad  $$   Ad  $$   $3.4  B  Ad  Revenue   $600  M  Subscriber  
  • 29. Breakeven Revenues for the NFLCurrent  TV   $  4  Billion   Internet  TV   Ad  Revenue?   ESPN   1   Network   1   1.9   ESPN   1.9   DirecTV   1.1   DirecTV   1.1   New   Revenue  Networks  get  approx.  $2.2  Billion  from  adverGsing  
  • 30. Key Numbers for Internet TV•  NFL  games  Reached…     –  207,700,000  unique  viewers  in  2010  in  the  U.S.  •  On  average…     –  17.9  million  viewers  per  game  
  • 31. What would NFL charge to breakeven? Viewership   100%   90%   75%   60%   45%   10%  Keep   Season    $              9.15     $        10.16      $        12.20      $        15.25      $        20.33      $        91.48    ESPN   A  la  carte    $              0.42    $              0.47    $              0.56     $              0.70      $              0.94      $              4.23    No   Season    $        14.44      $        16.05      $        19.26      $        24.07      $        32.10      $    144.44    ESPN   A  la  carte    $              0.63    $              0.70    $              0.84     $              1.05      $              1.39      $              6.28     *  DirecTV  is  charging  $350!  
  • 32. NFL Internet TV Pie Potential Lower   Ticket   Prices   Ad  Rev.  equal   Cover  $1.9  with   Cover  $1.9B     $11.5   to  Networks  + Subs.  +  Gain  Ad   $6.2  Billion   $4  Billion   lost    with  Ad   10%  Sequal  to   Rev   ubscribe   Billion   Rev.   at  $350   Networks   Increase   Intl    Exposure  
  • 33. What is stopping the NFL?•  Does  this  fit  the  goals  of  the  NFL?   –  Not  currently  since  internet  connecTvity  is  only  at  77.3%   with  only  57%  having  high-­‐speed   –  While  99%  of  the  US  has  TV  access   –  However  internet  is  trending  up  •  Requires  the  NFL  to  become  a  distributor   –  Experience  with  NFL  Network  and  NFL  RedZone  •  NFL  would  have  to  interact  on  a  higher  level  with  fans  •  NFL  does  not  know  how  this  channel  will  develop   –  Goes  against  their  “Wait  &  See”  strategy  •  Is  this  decision  reversible?  
  • 34. QUESTIONS? THANK  YOU!  
  • 35. Back- up Slides Ahead
  • 36. NFL  vs.  PrimeTme  Viewership  
  • 37. Most  Watched  Shows  for  Fall  TV   Season  
  • 38. 15  Most  Watched  Basic  Cable  Shows   of  2010  
  • 39. History  s  t the  Product  User  Paths  to  NFL  Where  iof  he  NFL?  
  • 40. Map of Cable Coverage
  • 41. The  NFL  is  a  Content  Producer   $5M/year $7/month2.3Subs$3B/yr rv $5/subXbox IPTV Opportunity  Cost   CompeGGon  
  • 42. Key  is  in  the  Strategy  and  Contracts  •  Strategy:  Wait  &  See,  Silo  &  Exclusivity     –  The  NFL  is  in  a  financial  posiTon  that  they  can  afford  to  wait  for   a  clear  winner(s)  to  emerge  before  signing  content  distribuTon   contracts   –  Puts  the  NFL  in  a  great  posiTon  to  take  advantage  of  new   technology  as  it  becomes  established  while  minimizing  their   risks  and  profiTng  greatly  •  Contracts:  Length  of  new  contracts  will  be  a  very  telling   signal  of  the  future  of  the  NFL  content   –  Long  contracts:  Signal  that  the  NFL  wants  to  milk  the  cash  from   this  established  distribuTon  because  it  is  established  and  not  at   risk  of  disappearing  or  being  disrupted  greatly   –  Short  contracts:  Signal  that  the  NFL  wants  to  potenTally  get  in   or  out  of  a  distribuTon  method   –  What    kill  switches    are  included  on  behalf  of  the  NFL?  
  • 43. Contract  Lengths  and  End  Dates  •  TV  Contracts:   –  CBS,  FOX,  NBC,  and  ESPN  expire  in  2013   •  Started  2006   –  DirecTV  expires  in  2014   –  ESPN  rumored  to  be  close  to  a  deal  to  lock  up  MNF  past  2020  –   but  hasn’t  happened  yet   •  In  the  news  January  2011  •  Wireless:   –  Verizon  signed  a  4  year  deal  for  2010-­‐2014  •  Will  be  interesTng  to  see  who  gets  and  how  long  new   distribuTon  contracts  are  for?   –  Depending  on  how  other  distribuTon  channels  advance  and   how  quickly  they  become  mainstream  could  affect  the  new   deals  of  the  TV  networks,  if  they  even  get  new  contracts.  
  • 44. TV  is  STll  Making  Money  Off  the  NFL  •  Current  Profit:   –  CBS:  $146  million   –  FOX:  $107  million   –  ESPN:  $83  million   –  NBC:  $12  million  •  However,  the  quesTon  is  will  this  last?   –  Analysts  suggest  that  it  will  and  that  these  profits  will   actually  grow  as  well  –  but  analysts  have  been  wrong   before  •  All  depends  on  companies  being  willing  to  spend   huge  $$$$$  on  adverTsements  
  • 45. Bring  Content  DistribuTon  In-­‐House  •  US  Pop:  307  million  •  NFL  Revenue:  $9.4  billion  •  Revenue  from  Networks:  approx.  $4  billion  •  2010  regular  season  reached  207.7  million  unique   viewers  •  NFL  games  were  watched  by  an  average  of  17.9  million   viewers  •  $3  billion/207.7  million  =  $14.44  •  Leave  ESPN  the  most  profitable  contract  in  place  for   MNF  -­‐  $1.1  billion  per  year  •  $1.9  billion/  (207.7  million  –  17.9  million)  =  $10.01  
  • 46. Value Added Process       Fans  
  • 47. Emerging Sports on Cable
  • 48. Established Cable $5M/year
  • 49. Investment Costs?
  • 50. Production Costs?
  • 51. How  the  NFL’s  Brand  Translates  to   Revenue  for  the  League   Thursday   Period AFC  Package NFC  Package Sunday  Night Monday  Night Total  Amount Night $420  million/1982–1986 NBC CBS None ABC   yr $473  million/1987–1989 NBC CBS ESPN  (2nd  half) ABC   yr TNT  (1st  half) $900  million/1990–1993 NBC CBS ABC   yr ESPN  (2nd  half) TNT  (1st  half) Fox  ($395  1994–1997 NBC ABC   $1.1  billion/yr million/yr) ESPN  (2nd  half) CBS  ($500   Fox  ($550   ESPN  ($600   ABC  ($550  1998–2005 ESPN $2.2  billion/yr million/yr) million/yr) million/yr) million/yr) NFL   CBS  ($622.5   Fox  ($712.5   NBC  ($650   ESPN  ($1.1   $3.085  2006–2013 Network   million/yr) million/yr) million/yr) billion/yr) billion/yr ($0/yr)
  • 52. Damage Control•  Corporate  Partners  •  Player  Sponsors  
  • 53. Rank   MSO   BasicVideoSubscribers   1   Comcast  CorporaTon   22,937,000   2   DirecTV   18,934,000   3   Dish  Network  CorporaTon   14,289,000   4   Time  Warner  Cable,  Inc.   12,551,000   5   Cox  CommunicaTons,  Inc.1   4,968,000   6   Charter  CommunicaTons,  Inc.   4,653,000   7   Verizon  CommunicaTons,  Inc.   3,290,000   8   Cablevision  Systems  CorporaTon   3,043,000   9   AT&T,  Inc.   2,739,000  
  • 54. NFL  as  a  Content  Distributor    •  NFL  distributes  Thursday  Night  Games  •  NFL  Network  and  NFL  RedZone   –  Sold  to  cable  companies   •  Comcast  pays  $5  million  a  year  to  have  these  channels   –  Many  cable  companies  have  not  picked  them  up   •  Represents  a  missed  opportunity  for  addiTonal  revenue   •  Does  not  compare  to  the  revenue  brought  in  by  networks   –  This  represents  a  risk  of  going  to  internet  TV  right  now   since  it  is  not  an  established  market  
  • 55. Move  to  Internet  TV  •  NFL  Revenue:  $9.4  billion  •  Revenue  from  Networks:  approx.  $3  billion  •  Reached  207.7  million  unique  viewers  in  2010  •  Games  watched  by  an  average  of  17.9  million  viewers  •  $3  billion/207.7  million  =  $14.44  for  season  •  Leave  ESPN  the  most  profitable  contract  and  largest  online   presence  in  place  for  MNF  -­‐  $1.1  billion  per  year  •  $1.9  billion/  (207.7  million  –  17.9  million)  =  $10.01  for  season  •  DirecTV  charges  $350  for  NFL  Sunday  Ticket  •  256  regular  season  games  +  11  playoff  games  =  267  •  $3  billion  /  (267  games  x  17.9million)  =  $0.63  per  game  •  $1.9  billion  /  ((267  games  –  16  MNF  games)  x  17.9million)  =  $0.42  
  • 56. Internet TV changing the game?•  Revenue  –  Direct  or  Indirect  from  consumer?  •  GlobalizaTon  –  channel  for  distribuTon?  •  Engagement  –  how  important  is  fan  interacTon?  •  Mobility  –  greater  access  with  increasing   connecTvity?  •  NFL  as  a  distributor  of  their  content?     –  NFL  Network  and  NFL  RedZone  channels  •  Other?  
  • 57. Breakeven Revenues for the NFL Current  TV   Internet  TV   $  4  Billion   Network   ESPN   1   1.9   1.9   ESPN   1.1   New  NFL  Rev   1.1   DirecTV   1   DirecTV  Networks  and  ESPN  get  $3.4  Billion  from  adverGsing   DirecTV  gets  $600  Million  from  subscribers  
  • 58. Key Numbers for Internet TV•  NFL  games  Reached…     –  207,700,000  unique  viewers  in  2010  in  the  U.S.  •  On  average…     –  17.9  million  viewers  per  game  
  • 59. Current TV Market Pie $8  Billion   Subscriber   Ad  $$   $$   NBC   DirecTV   CBS   $4  Billion  Ad  $$   Ad  $$   ESPN   FOX   Ad  $$  
  • 60. What would NFL charge? Viewership   100%   90%   75%   60%   45%  Keep   Season    $              9.15      $        10.16      $        12.20      $        15.25      $        20.33    ESPN   A  la  carte    $              0.42      $              0.47      $              0.56      $              0.70      $              0.94    No  ESPN   Season    $        14.44      $        16.05      $        19.26      $        24.07      $        32.10     A  la  carte    $              0.63      $              0.70      $              0.84      $              1.05      $              1.39     *  DirecTV  is  charging  $350!  
  • 61. Silo via ESPN3.com? AD   Ad  $$   $$   $2Billion   ESPN  Ad  $$   Ad  $$   $6  Billion   Subs  &  Ad  Revenues   Ad  $$  
  • 62. Current, Breakeven & Potential $12  Billion   45%  Subscribe   at  $175   $8  Billion  Lower  Ticket  Prices   $4  Billion   Increase   Intl    Exposure  
  • 63. What is stopping the NFL?•  Does  this  fit  the  goals  of  the  NFL?   –  Not  currently  since  internet  connecTvity  is  only  at  77.3%   with  only  57%  having  high-­‐speed   –  While  99%  of  the  US  has  TV  access   –  However  internet  is  trending  up  •  Requires  the  NFL  to  become  a  distributor   –  Experience  with  NFL  Network  and  NFL  RedZone  •  NFL  would  have  to  interact  with  the  fan  on  a  higher   level  –  new  to  them  •  NFL  does  not  know  how  this  channel  will  develop   –  Goes  against  their  “Wait  &  See”  strategy  •  Is  this  decision  reversible?